Medicare Advantage Rate Proposal: What Insurers Need to Know
Federal regulators have proposed maintaining Medicare Advantage (MA) rates at the same level next year and adjusting the risk calculation process, leading to significant industry feedback. The administration's proposal includes an average increase of less than 0.1% for MA plans in 2027 and introduces stricter guidelines on health risk adjustments. Insurers argue that the proposal does not adequately reflect rising healthcare costs, potentially affecting coverage and benefits for seniors enrolled in MA.
The Centers for Medicare & Medicaid Services (CMS) reported receiving nearly 47,000 comments on this proposal, marking a significant response from the industry. Officials noted this at the Better Medicare Alliance’s summit in Washington, D.C. Major stakeholders like UnitedHealth, the Better Medicare Alliance (BMA), and America’s Health Insurance Plans (AHIP) expressed concerns, noting that the proposal fails to account for increasing medical expenses.
The core issue involves differing views on the expected increase in medical spending, with CMS projecting an effective growth rate of nearly 5%, considerably lower than previous estimates. This calculation is critical as it influences payment adjustments under the MA plans. Some industry participants have questioned the accuracy of this growth rate, suggesting it might not represent actual trends in traditional Medicare data.
Despite these concerns, historical precedent suggests that final payment rules might offer higher growth rates, potentially providing better financial outcomes for MA plans. An analysis by consultancy BRG indicated that a 1% increase in the growth rate could raise payments by approximately $12 per member monthly.
Amidst the debate, the industry has urged for a delay in implementing certain aspects of the proposal, including changes to risk score adjustments and exclusions of specific chart reviews. Insurers assert that without increased funding, they might have to reduce MA offerings, impacting market stability. In 2026, plan terminations required approximately 2.9 million enrollees to find new coverage, highlighting ongoing challenges.
Officials argue that the adjustments aim for payment integrity and program longevity. Research has pointed to potential overpayments in MA plans, a concern regulators aim to address. Feedback from the industry is valued, with ongoing collaboration encouraged to refine these proposals.
Separately, Senator Chuck Grassley has hinted at potential legislative action to address Pharmacy Benefit Manager (PBM) practices. Concurrently, CMS plans to improve its audit processes and resolve existing review backlogs by enhancing its technological capabilities and expanding its workforce.